SAM DUNN: It's time to end the pension exit scam and unfair fees that eat into your retirement

It's not always easy to walk away from a financial deal into which you’ve poured your cash when its fortunes begin to fade fast.

Fear of making the wrong decision can paralyse even the hardiest of souls when it comes to taking control of your personal finances.

Take shares, where you’ve always the fear of selling at just the wrong moment — leaving you to watch their value rocket and rue what might have been.

Investment funds are tricky to turn away from, too. Even if its performance starts to sag badly, it’s all too easy to settle into a ‘well, all the others are just as bad’ attitude, and let things lie.

However, even the most stubborn of us
know, deep down, it’s vital to pull out when losses become too great —
and fund managers make it relatively easy to do so.

It’s
easier, too, to turn your back on a savings account that starts to look
a little ropey when once-attractive rates start to fade.

Switching
is now so easy to do, and since interest rates are not prone to wild
lurches, there is no excuse for leaving your money in any account paying
a 0.1 per cent pittance.

In some cases, threatening to leave a financial deal can even save you money. If you’re sick of paying too much for your gas and electricity, car insurance cover or home phone service, call your provider and demand a better offer, or threaten to take your custom elsewhere.

Yet there’s one product where the exit door is very hard to push open. If you want to wave goodbye to a rotten pension fund without paying a penalty, it can be tougher than pulling teeth.

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Many older pension funds carry annual management fees of up to 4 per cent. By comparison, fees can be as low as 0.7 per cent on newer, cheaper retirement funds.

Not unreasonably, many workers are horrified at the impact of hefty annual fees on their nest-eggs, or want to leave because they are deeply unhappy at abject fund performance.

Compare the impact of a pension fund charging 4 per cent a year to one charging less than 1 per cent — a stonking 40 per cent less at retirement — and you’d be crazy not to want to leave.

But it’s easier said than done. Some funds charge leavers up to one-fifth of the value of their pension pot if they decide to switch to a rival scheme that is a lot cheaper to run and offers better value.

Stubborn pension fund managers desperate to cling onto your money usually trot out the same excuses.

They claim the fees are there to protect those who still have money in the fund from an even heftier blow to their fortunes than otherwise would be the case.

Or they declare that the saver benefited from charges which were lower than the pension provider’s own costs — and must therefore pay a penalty to ‘correct’ this.

Planning for the future: Finding a good pension with low annual fees can make a considerable difference when planning a happy retirement

What tosh. It’s not impossible for the multi-billion-pound pension fund industry to come up with a better solution for those who want out than to wallop fed-up savers with hefty fees.

There’s simply been no incentive for them to do so, despite Money Mail’s constant exposure of such unfair behaviour over the years.

Yet it seems a whiff of change might finally be in the air. In what could turn out to be a promising move, the Association of British Insurers (ABI) — the industry body which represents pensions providers — said it was talking to its members about the scale of the problem.

Its concession comes hard on the heels of a broadside by Pensions Minister Steve Webb. As part of an attack on the pension industry, he lambasted some retirement schemes for having ‘torn out the heart’ of workers’ savings because of high fees.

In effect, he has asked pension companies to do away with their array of unfair terms and switch them instead into fresh deals without such draconian small print.

His timing makes a lot of sense. In just a few months’ time, the new ‘auto-enrolment’ pension scheme — the Government-backed National Employment Savings Trust — will begin to be rolled out across the UK.

These low-cost retirement plans, with annual target fees of 0.5 per cent, aim to turn apathy on its head and force workers to engage with their pension.

So if you don’t want a pension, you now have to opt out.

It’s a canny move that could use inertia to help boost retirement planning for millions. Better still, their relative cheapness has put the thorny problem of pension fees — especially in giant established funds — squarely back in the spotlight.

And this can only be a good thing. Shining a spotlight on this lucrative wheeze — management fees for often, at best, mediocre performance, generates millions for each pension company — will force a much more open debate about the precise costs of running a pension fund.

And now the ABI has at least started to talk about the problem, it must commit to some sort of action.

It could begin by publishing a full list of all its members’ funds exit fees, and the impact they would have on each £1,000 of a departing saver’s cash.

Such transparency would spark, I hazard, enough outrage to give plenty of momentum for change.

While the threat of legislation is unlikely to force pension companies to abolish the fees altogether, public humiliation is often enough to start the ball rolling.

We at Money Mail will keep a close eye on the ABI’s progress and report back to you.